and I think the method you suggest is one of the means they have adopted, and have properly adopted. If Mr. HARVIE. I should like to ask Mr. Parker a question. Mr. Parker, reference was made just now to the Liverpool market. we should undertake by this legislation to prohibit cablegram communications of this kind with the Liverpool Exchange, as well as telegraphic communications with New York and New Orleans of this character, why would not that have the effect of protecting our people against Liverpool gambling? Mr. PARKER. It would go very far toward protecting them. Mr. HARVIE. They could not sell their contracts over here of that character, and they could not get in that sort of communication with the producers, or the people who could get the cotton from the producers, unless they were going to buy it and had the actual spots, could they? Mr. PARKER. No, sir. Mr. HARVIE. And therefore could we not, by international legislation of that character, get international protection as well as interstate protection? Mr. PARKER. I think so. I will go further: I am satisfied, gentlemen, that the English spinner stands right with the American spinner on that proposition. If the speculation is going to be transferred to the Liverpool Exchange, and if the effect of a transfer of speculation to the Liverpool Exchange is the same as they say it would be, then I say to you with absolute assurance, as a spinner who is in constant touch with English spinners, that I know we can get. together, and that our friends over there will do in England exactly what we are doing here. Mr. MENDELBAUM. Mr. Chairman, one question Mr. CONE. One minute, Mr. Chairman. Do you not think you and I would have a picnic, Mr. Parker, in buying our cotton, if you could just stop trading in Liverpool? Mr. PARKER. I do not think so, sir; no, sir. I hope and believe the time is going to come when the planter will give the mill his cotton just as the mill needs it, and not feel it necessary to dump it all on the market. I think that is coming. When that day does come, I think the planter is going to have a great deal more to do with fixing the price than he now has; and I do not think that 'picnic," as my friend says, is going to come. Mr. Mr. LEVER. Just one further question as a parting question. Parker has rather fully covered this matter, but I should like to get it in the form of a question. What would be the ultimate effect on producer and spinner of the abolition of the exchanges in this country? Mr. PARKER. It would revolutionize, of course, the character of the present business. I would not sell ahead, as I now do, covering on the exchange, without having made absolute purchases of my cotton-spot cotton. But it would not affect me in my sales ahead. I would have to readjust my business, and I would readjust it and buy the spot cotton, put it in my warehouse, and carry it; or if I could find such a man as my friend Mr. Neville, with his financial backing, I might take a chance at him, and let him agree to sell it to me for delivery three, four, or five months afterwards. Mr. LEVER. There would be no difficulty, then, in readjusting your business so as to meet it? Mr. PARKER. I do not think so; no, sir. I do not think so. I have regretted exceedingly to have a condition arise where I felt that the exchanges had to be abolished. But I do say that if the exchanges do not respond to this just demand, then there is nothing to do except to regulate them. I do say that they have not responded, and, judging from the past, I can not hope that they will do so in the future. Mr. LEVER. So, then, you would recommend legislation regulating the exchanges? Mr. PARKER. That is my only hope. In conclusion, gentlemen, I just want to read one paragraph from this report of ours of the year 1908, which expresses the view of the spinner. It is headed "Fair prices only desired" [reading]: It may be said in this connection that low prices of cottor, as also great variance in prices, in any season are altogether as much to the detriment of the spinner as they are to the planter himself. What is desired by both parties is a fair value to the commodity, allowing to the producer a fair profit in the raising and fixing in some measure a stable price upon which the spinner can calculate in making his sales. These two results can not be secured under present conditions on the exchanges, and particularly on the New York Exchange, and your committee does not feel that it can conclude its report without expressing its disapproval of the contract of the New York Exchange, and a sincere hope that the leaders on the New York Exchange will realize the defects of their contract and sincerely attempt to remedy the same. Under present conditions, the contract on the New York Exchange can be of value only to the speculator. It is not to the producer or to the manufacturer. It should be clearly borne in mind that the great mass of buyers of goods, particularly buyers for export, base their ideas of the value of goods upon contract quotations on the New York Exchange, and that these buyers are wholly misled, therefore, as to the cost of the raw material to the manufacturer. Being thus misled, it makes a constant effort on their part to secure prices on the manufactured article which are below what the manufacturer can possibly sell at. Under such circumstances, erroneous market quotations become a curse to the manufacturer and to the producer, and we feel that the New York Exchange must rectify its contract so as to make the contract responsive to the spot condition. That is all we ask. If they will make their contract_responsive to spot conditions, then we have no complaint to make. But they have not done it. Mr. LEVER. What was the response of the New York Exchange to that appeal? Mr. PARKER. We had a very pleasant gathering and enjoyed their social entertainment and talked over matters, and they made a report in which they undertook, recognizing the disparity between spots and futures, to provide for two methods of contracts-a spot contract and a nonspot contract; in other words, a legitimate contract and a nonlegitimate contract, from our view of it. We told them that was not satisfactory; that it would only exaggerate the difference between spots and futures. And therefore they have done nothing. That is practically all that can be said. Mr. LEVER. They have done nothing? Mr. PARKER. They have done nothing. That has been two years ago, and I can not hope to see a result which is going to effect any good. Mr. SIMS. Suppose the rules of the exchanges were changed or amended so as to give the seller the option of delivering one-half the contract and give the buyer the option on the other half. If that could be made practicable, what effect would it have? Mr. PARKER. It would bring spots and futures together so quick, sir, that you would not Mr. SIMS. Then would not that kind of an amendment to the rules be a solution of the whole question? Mr. PARKER. That would answer all our purposes. If they let the buyer demand half, or let the seller at his option deliver the other half of whatever kind he has, I think they would very quickly get together. Mr. SIMS. Why is not that a fair deal? Mr. PARKER. În my judgment it is a square deal. Our very demand is for that-and we went further than that. In our demand we went so far as to say that we would give a quarter of a cent for the right to ask, and I will pay now a quarter of a cent for the right to ask a half. Mr. HARVIE. If the chairman will permit me, what becomes of the producer? He would be still subject to all the fluctuations that come from gambling, would he not? Mr. PARKER. The fluctuations from gambling are not troublesome provided the man has to deliver what he sells. If he is put up to the point of delivering what he sells, I am not afraid. Mr. HARVIE. That would not be gambling if he is going to actually deliver it, Mr. Parker. Mr. PARKER. No, sir; that is not gambling. Mr. HARVIE. What I am speaking of is this: You said that if the rules of the exchanges were changed a little, it would answer your purposes. My contention is that if they are permitted to give out contracts or deal in contracts where there is to be no delivery, the evil is not reached at all. Mr. PARKER. Well, theoretically, delivery is expected on every contract. Mr. HARVIE. Yes; theoretically. Mr. PARKER. If they once get to the point where I can demand that cotton, and not to be given whatever the seller chooses to give me, I can demand cotton sufficient to bring the futures and spots together. Mr. BURLESON. You need not waste any time on that proposition, because neither one of the exchanges will ever adopt any such rule. Mr. PARKER. I still have hope in mankind. The CHAIRMAN. Are there any further questions? Mr. MENDELBAUM. I should like to ask one question that I think was not brought out. Mr. Parker, you testified here that the tendency of the exchanges is to depress the price of cotton? Mr. PARKER. On an average. Mr. MENDELBAUM. How is it that the spinners, in their conventions, always complain against the exchanges for causing an advance in the price of cotton, the raw material? Mr. PARKER. Well, sir, I have been to a good many spinners' conventions, and I have never heard of a complaint from a spinner to that effect. Mr. MENDELBAUM. Did not the Englishmen, in the convention in Europe, complain? Mr. PARKER. Oh, I do not doubt that the English spinner is always sorry when cotton advances. But I do not think even the English spinner is interested in the advance so much as he is in the violent fluctuations consequent upon speculation. So far as I have attended the spinners' conventions in America (I can only speak of America; I have never been to a spinners' convention outside of it), I have never heard any objection to the price of the raw material if that price remains reasonably steady, so as to give us time to bring our goods to a parity with it. But just take even the last thirty days. Take print cloths now. We had brought print cloths to a parity with 15cent cotton. I could make as much money three weeks ago off of 15-cent cotton as I could make a year ago off of 9-cent cotton. I was satisfied with the conditions. My New York friends suddenly sent the market down 3 cents when the conditions had not changed one particle. Spot cotton was no more spot cotton. There was every indication that it would be less than we expected, rather than more. They sent cotton down 3 cents. The result was that the purchaser of goods immediately said: "We will not buy your goods at the price we were willing to give you three weeks ago. We are not going to take them at this price, because cotton has gone down 3 cents a pound." And I can not convince them to save my life that it has not gone down 3 cents a pound. The result is that it upsets all trade; and the decline in goods to-day is equal to what was the decline in cotton futures, although spot cotton has remained constant. Mr. LEVER. I understood you to say the 3-cent drop in cotton was not due to unusual conditions at all? Mr. PARKER. I do not think anybody will contend that it was due to unusual conditions. Mr. LEVER. It was purely speculative? Mr. PARKER. Purely speculative. Mr. MENDELBAUM. Do not the American spinners belong to the International Spinners' Association and attend their meetings? Mr. PARKER. They do not belong to it in the sense of having any membership. There has been a delegate sent from the two different American associations to the gatherings of the foreign spinners. Mr. BURLESON. Before we get away from that, I should like to see if I understood Mr. Mendelbaum exactly right. I understood you to say that the spinners have been uniformly against the practices of the exchanges; and you asked Mr. Parker why it was that they are complaining if it depresses the price of cotton? Mr. MENDELBAUM. Do you want me to answer you now? Mr. MENDELBAUM. You misunderstood me. Mr. BURLESON. That is the way I understand your question of Mr. Parker-why the spinners were uniformly against these practices if they depressed the price of cotton? (By request the stenographer read aloud the question referred to, as follows:) Mr. MENDELBAUM. How is it that the spinners, in their conventions, always complain against the exchanges for causing an advance in the price of cotton, the raw material? Mr. NEVILLE. That is not your question, though. Mr. PARKER. I shall be very glad, indeed, to furnish the committee with a copy of this report which we made two years ago on the question of exchanges, so that you may see the full position taken by the American Cotton Manufacturers' Association at that time. I will say that that position was simply a reaffirmation of the position taken two years prior to that, in 1906; so that the spinners of America as represented by the American Cotton Manufacturers' Association, have certainly been on record for a number of years in this regard. 36387-A A B-vol 2-10-4 The American Cotton Manufacturers' Association has a thousand or more members. They represent about evenly the North and the South. My recollection is that there are about 550 members from the North and 550 members from the South. So that it is certainly an association which is representative of the spinning industry. You will find, for instance, in this book, a list of the members; you will find that they cover every State in the Union in which there is cotton spinning; and that was the sentiment of our association. The CHAIRMAN. We shall be very glad to have that volume left on file here. Just one further question to see that I have your position clearly: I understand your position to be that the spinners are not complaining particularly because cotton is depressed on the one hand or advanced on the other, but because of the fluctuations claimed to be due to the practices of the exchanges? Mr. PARKER. I will modify that in this way, Mr. Chairman: The spinners do not complain of high prices as much as they do of irregularity of prices. The irregularity of prices, in our judgment, is largely due to the speculation through the exchanges. In other words, to take the past season, I recognize the fact that there was a legitimate gradual increase of value of cotton, because in the beginning of the season we started out believing there were going to be 12,000,000 bales. A little later we dropped our opinion to 11,000,000 bales. We have dropped our opinion now so we think the crop will probably not exceed ten and a half millions, if so much. And therefore, as we have had to lower our opinion as to the size of the crop, we recognize this increase in value. But what we do object to is when, on January 16, for instance, the Government came out with its report and showed the crop to be even shorter than the world had expected, and even indicated a reduction from the December report, that there should have been, notwithstanding that fact, a sudden reduction of 3 cents a pound in the contracts not responded to in the spots, which reduction in the contracts had the effect of demoralizing the trade over the whole United States, and I think I may say over the whole world. The CHAIRMAN. I think you make your position very clear. Are there any further questions? Mr. BEALL. Taking conditions as they exist this year, do you believe the cotton producer of the South has realized as much for his cotton under present conditions as he would have realized if it had not been for this speculative feature? Mr. PARKER. Yes, sir; I think the cotton producer this year has realized, through the effect of speculation, more than he would have realized if there had not been speculation. Mr. BEALL. Is this year, in your judgment, an exceptional year? Or would that rule apply to the average run of years? Mr. PARKER. It is an exceptional year. There has not been a year like this year almost since the memory of man; certainly not since the average spinner who is now spinning has been spinning. I do not recollect any other season where cotton has advanced steadily through the four months; do you, Mr. Neville? Mr. NEVILLE. Oh, yes. Mr. MENDELBAUM. 1899, 1900, 1901 Mr. PARKER. Not to the same extent that it has this year. This is the first time you have had 15-cent cotton, certainly since I began spinning. I began spinning in 1897. You had it in February |